As the credit crisis continues to grow and the US dollar hits a new low, we turn today to the former Chairman of the Federal Reserve Alan Greenspan. Greenspan headed the central bank in the United States for almost two decades. He was first appointed to this position in 1987 by President Ronald Reagan. Greenspan retired in January 2006 after deciding the fate of national interest rates under four different Presidents. Dubbed "The Maestro," he was widely regarded as one of the world's most influential economic policymakers.
He has just written a new 500-page memoir. It's called "The Age of Turbulence: Adventures in a New World." Alan Greenspan joins us on the telephone. And we are joined in studio by journalist Naomi Klein, author of "The Shock Doctrine."
- Alan Greenspan, Chairman of the Federal Reserve from 1987 to 2006. His new memoir is "The Age of Turbulence: Adventures in a New World."
- Naomi Klein, award-winning investigative journalist, the bestselling author of "No Logo" and the co-director of "The Take." Her latest book is called "The Shock Doctrine: The Rise of Disaster Capitalism."AMY GOODMAN: As the credit crisis continues to grow and the US dollar hits a new low, we turn today to the former Chair of the Federal Reserve, Alan Greenspan. Alan Greenspan headed the central bank in the United States for almost two decades. He was first appointed to this position in 1987 by President Ronald Reagan. Greenspan retired in January 2006, after deciding the fate of national interest rates under four different presidents. Dubbed “the Maestro,” he was widely regarded as one of the world's most influential economic policymakers. He has just written a new 500-page memoir; it’s called The Age of Turbulence: Adventures in a New World.
ALAN GREENSPAN: Thank you very much. I’m delighted.
AMY GOODMAN: It’s good to have you with us. You worked with six presidents, with President Reagan, with both President Bushes. You worked with President Ford, and you worked with Bill Clinton, who you have called a Republican president; why?
ALAN GREENSPAN: That was supposed to be a quasi-joke.
AMY GOODMAN: Talk about it.
ALAN GREENSPAN: Well, Clinton?
AMY GOODMAN: Yes.
ALAN GREENSPAN: Well, I stated that I’m a libertarian Republican, which means I believe in a series of issues, such as smaller government, constraint on budget deficits, free markets, globalization, and a whole series of other things, including welfare reform. And as you may remember, Bill Clinton was pretty much in the same -- was doing much that same agenda. And so, I got to consider him as someone -- as he described it, we were both an odd couple, because he is a centrist Democrat. And that's not all that far from libertarian Republicanism.
AMY GOODMAN: About how much would you say you agreed with him?
ALAN GREENSPAN: On economic issues, I would say probably 80%.
AMY GOODMAN: And what about President Bush?
ALAN GREENSPAN: President Bush had the wonderful characteristic of knowing that it was not to his advantage or to ours to interfere with the actions of the Federal Reserve. And I must say, through all of his years, he never once second-guessed what the Fed was doing. And that was very important to us, and we’ve been very much appreciative of that.
But, as I say in the book, he did not clamp down, as I thought was necessary, on what was a wayward Republican-controlled Congress, which I thought lost its way and started to spend and create all sorts of fiscal imbalances. And, essentially, what I hold -- where I thought the administration could have done far better is if the veto were employed. And as you may remember, he did not use the veto at all. And that, what I thought, would have created a much more balanced procedure in the Congress. So it's a mixed case in this regard.
AMY GOODMAN: Alan Greenspan, let's talk about the war in Iraq. You said what for many in your circles is the unspeakable, that the war in Iraq was for oil. Can you explain?
ALAN GREENSPAN: Yes. The point I was making was that if there were no oil under the sands of Iraq, Saddam Hussein would have never been able to accumulate the resources which enabled him to threaten his neighbors, Iran, Kuwait, Saudi Arabia. And having watched him for thirty years, I was very fearful that he, if he ever achieved -- and I thought he might very well be able to buy one -- an atomic device, he would have essentially endeavored and perhaps succeeded in controlling the flow of oil through the Straits of Hormuz, which is the channel through which eighteen or nineteen million barrels a day of the world eighty-five million barrel crude oil production flows. Had he decided to shut down, say, seven million barrels a day, which he could have done if he controlled, he could have essentially also shut down a significant part of economic activity throughout the world.
The size of the threat that he posed, as I saw it emerging, I thought was scary. And so, getting him out of office or getting him out of the control position he was in, I thought, was essential. And whether that be done by one means or another was not as important, but it’s clear to me that were there not the oil resources in Iraq, the whole picture of how that part of the Middle East developed would have been different.
AMY GOODMAN: We’re also joined in studio by Naomi Klein, author of the book The Shock Doctrine: The Rise of Disaster Capitalism. Your response to that, Naomi Klein?
NAOMI KLEIN: Well, I’m just wondering if it troubles Mr. Greenspan at all that wars over resources in other countries are actually illegal. Mr. Greenspan has praised the rule of law, the importance of the rule of law, in his book. But in his statements about the reasons why this has not been publicly discussed, he has said that it’s not politically expedient at this moment. But it’s not just that it’s not politically expedient, Mr. Greenspan. Are you aware that, according to the Hague Regulations and the Geneva Conventions, it is illegal for one country to invade another over its natural resources?
ALAN GREENSPAN: No. What I was saying is that the issue which, as you know, most people who were pressing for the war were concerned with were weapons of mass destruction. I personally believed that Saddam was behaving in a way that he probably very well had, almost certainly had, weapons of mass destruction. I was surprised, as most, that he didn't. But what I was saying is that my reason for being pleased to see Saddam out of office had nothing to do with the weapons of mass destruction. It had to do with the potential threat that he could create to the rest of the world.
NAOMI KLEIN: Yes, I realize that, but he was not simply deposed. The US invaded Iraq, occupied it and took control over its resources. And under international law, that it is illegal to wage wars to gain access to other countries’, sovereign countries’, natural resources.
ALAN GREENSPAN: Yes. No, I’m fully aware of the fact that that is a highly, terribly important issue. And as I said in other commentaries, I have always thought the issue of what essentially amounts to what is often called pre-emptive, preventive action on the part of some countries to secure resources or something else like that, it's an issue that goes back to the Cold War, when we had the very difficult moral dilemma of what do you do when you think a missile is coming in our direction and you’re not sure whether it’s an accident or not an accident. And that is a problem which I think is a deep moral problem in civilized society. And the issue is one which I don't think we’re going to resolve very easily. And as you point out, yes, I am a believer in the rule of law, and I think it is a critical issue, not only for domestic economies, but for the world economy as a whole.
AMY GOODMAN: Naomi Klein?
NAOMI KLEIN: You have also advocated economic shock therapy and supported IMF programs that have transformed economies very, very quickly. And then, you say that you are in support of the rule of law. But I’m just wondering how, in a country like Russia, there could be rule of law when it’s being transformed in fast-forward in that way.
ALAN GREENSPAN: Well, remember that you don't get a market economy merely by eliminating central planning. And remember, when the Berlin Wall came down and the Soviet Union disintegrated, you didn't have a market economy. What you basically had was a black market economy. And they tried to develop the institutions of the democratic society, and it's not something which they have had back for generations. And as you can see now, there’s an increasing authoritarianism. It's a very -- it’s a society which has very different trends at different levels of that society. And I don't know exactly where they’re coming up, but I don't like the direction it's been going in in recent years.
AMY GOODMAN: I wanted to go back to Iraq and ask you about, well, a piece by Jim Steele and Don Barlett that came out in Vanity Fair, where they’re talking about the billions lost in Iraq. And they begin their piece by saying, “Between April 2003 and June 2004, [$12 billion] in US currency -- much of it belonging to the Iraqi people -- was shipped from the Federal Reserve to Baghdad, where it was dispensed by the Coalition Provisional Authority. Some of the cash went to pay for projects and keep ministries afloat, but, incredibly, at least $9 billion has gone missing, unaccounted for, in a frenzy of mismanagement and greed.”
Alan Greenspan, when you were head of the Federal Reserve, how much knowledge do you have of this? Did you investigate this? And did you investigate this? Were you aware of this at the time?
ALAN GREENSPAN: Well, let me say that what we were involved in was essentially endeavoring to create a viable currency for the central bank of Iraq. And what we did do was -- I think very successfully -- create what is a viable financial system, even under the circumstances that currently exist. There was, as far as I can judge, a huge drain of the resources into areas which nobody to this day can understand or follow. It had nothing to do with the central bank. In our relationships with them, we were merely acting as an intermediary to assist them in creating a system, which they now have, which is working reasonably well, despite all of the problems that are going on. The issue which you are referring to had nothing to do with the Federal Reserve in any of our relationships with the central bank.
AMY GOODMAN: Well, they are talking about, in one day, for example, the East Rutherford operation center of the Federal Reserve Bank of New York, 100 Orchard Street in East Rutherford, a tractor-trailer truck pulling up, and though accustomed to receiving and shipping large quantities of cash, the vault had never before processed a single order of this magnitude: $2.4 billion in $100 bills. But ultimately, again, $9 billion of $12 billion gone missing in Iraq.
ALAN GREENSPAN: I am not familiar with any such evidence. And it was certainly not brought to my attention. I, frankly, find it very unlikely that those orders of magnitude were involved in any of the numbers that we were dealing with. You have to make certain that -- there’s been a lot of confusion about losses, and people have used the dinar, the basic currency unit of Iraq, and assumed they were American dollars. And, of course, that gives you a highly distorted view. There’s been, I’ve seen, several reports fairly recently in which that sort of mistake was being made. But what I can tell you is that no such numbers of any order of magnitude of the type you are discussing came to the attention of the Federal Reserve.
AMY GOODMAN: This is based on that award-winning article in Vanity Fair, or the team who have won --
ALAN GREENSPAN: Let me put it this way, award-winning doesn't necessarily --
AMY GOODMAN: Well, no, no. I mean Don Barlett and Jim Steele, Pulitzer Prize-winning journalists. I’m sure you know their work. But Naomi Klein?
NAOMI KLEIN: Well, I would just add that it’s quite surprising, actually, that Mr. Greenspan is unaware of this scandal around Iraq's missing billions, because Paul Bremer had to testify before Congress and was asked directly about those missing billions. It’s been the subject of very high-level investigations. There is a huge paper trail around it. So this is hardly a secret, and it’s hardly just a matter that’s confined to Vanity Fair. This is --
ALAN GREENSPAN: Oh, I’m not saying that the losses are not real. I think they are, because, obviously, we can't account for all the oil revenues. I’m just merely saying it’s not something which was directly related to any of the actions which the Federal Reserve Bank of New York, to which we were referring, was involved, as far as I know.
AMY GOODMAN: Alan Greenspan, we have to break for sixty seconds, but we’ll be back with you. Alan Greenspan, the former Chair of the Federal Reserve from 1987 to 2006. His memoir is out now; it’s called The Age of Turbulence: Adventures in a New World. We’ll be back with him in one minute. Stay with us